Wealthy Chinese Look Beyond The American Dream
8th December 2014 Tara Loader Wilkinson
China's rich visa-seekers are discovering alternatives to foreign investment visa schemes in the US, Canada and Australia, and are increasingly applying to Europe and the Commonwealth Caribbean.
Whether it is to send their children to elite universities or simply escape the polluted air, American and Canadian citizenship-for-investment programs have in recent years attracted wealthy Chinese in their droves.
Chinese are the largest group of investor immigrants for the US, Canada, Portugal and Australia, and some visas have as much as 80 percent take-up by People’s Republic of China nationals, according to law firm Withers. But now with Canada’s programme closed down, the UK and Australia’s schemes growing more expensive, and strict taxation on US green card holders and US citizens, Chinese nationals are looking beyond the ‘usual’ options.
“There are several ways to establish a foothold in the US. Not everyone realises that a green card is one of many,” said Mark Lanning, director of immigration at Withers.
Excellent educational institutions, strong capital markets and quality of life have historically provided the pull factor to these countries. But now many are limiting their programs while they deal with the backlog of applications from China. There is a four-year waiting list for Chinese nationals applying for the US EB-5 'green card' visa, according to Reaz Jafri, attorney at law at New York-based Withers Bergman.
“If your 18-year-old daughter is about to start at Harvard and you apply for an EB-5 visa now, you’re not going to make it in time (to live there). In fact, you’re not even going to make it for her graduation,” said Jafri.
The US’ EB-5 visa requires investment of between US$500,000 and US$1 million in return for a conditional green card. There are just 10,000 of these visas issued annually and a cap on each nationality, and many Chinese applicants are being forced to wait until 2018, reckons Jafri.
This April Canada stopped accepting applications for its immigrant investor program and the federal entrepreneur program, of which around 90 percent of applications were from China. The initiatives, which allowed investors with a minimum net worth of C$1.6 million (US$1.42 million) to invest C$800,000 (US$708,000) in return for residence, had hit a logjam. The government’s Citizenship and Immigration Canada (CIC) has said it is 'reviewing the programme' which it may reopen.
As for Australia, the good news is that from 2015 a foreigner can get permanent residency in just one year. The bad news? It will cost an eye-watering A$15 million (US$13 million) investment. Applicants for the new Premium Investor Visa will also be strictly vetted to ensure they meet eligibility criteria.
And this month the UK Government doubled the minimum investment required for the Tier 1 Investor visa scheme to £2 million (US$3.13 million). The visa allows non-European citizens and their families to live in the UK in return for a £2 million (US$3.13 million) investment in UK companies or UK government bonds. Chinese are also the number one source of applicants for this visa, followed by Russians.
What does this mean for footloose wealthy Chinese?
If they want to go to the US there are lesser-known alternatives, according to Withers, like the L-1A visa, an inter-company transfer for executive or management level individuals. There is the O-1 for individuals of 'extraordinary ability' and the E-2, the treaty investor visa. Obama last week also extended a new visa law to make it easier for Chinese students and tourists to come to the US, as well as homebuyers, a sign that the US wants to encourage the flow of capital into its property markets.
Armand Arton, chief executive and president and Dubai-based citizenship advisor Arton Capital, said the reasons for wanting a second citizenship are fundamental in deciding the destination and type of visa.
“There are two kinds of investment programs, one that leads to immediate citizenship and one for longer term residence,” he said.
St. Kitts, Antigua, Dominica, Grenada and Cyprus offer immediate citizenship and Bulgaria and Malta offer accelerated citizenship. Traditionally families in the Middle East or Pakistan have used these programs as the urgency for a free passport may be their main priority, he explained.
Investor programs for residence, like in Portugal, Spain, Greece, Hungary, UK, Canada, US, Australia, where the investor receives only Permanent Resident (PR) Status, are more popular in China, he said. Under these programs it is legal for them to invest abroad and obtain PR, while applying for immediate citizenship is against the law in China.
“Chinese have traditionally dominated residency programs and they will now start to dominate the programs for citizenship over the next five years, because some countries are limiting Chinese applications,” predicts Arton.
He added that Chinese investors are looking at more European options, especially since the UK visa price hike. “The recent increase of the Tier 1 Investor visa will have an important impact on demand, because Chinese investors can obtain citizenship in Cyprus, Malta or Bulgaria and still settle in UK.”
The lower investment bar in Greece, Hungary and Bulgaria has attracted already over 2,000 Chinese investors in the three countries combined in the last twelve months, and Portugal and Spain are following the competition with around 750 Chinese families in the same time period, said Arton.
While the US, Canada and UK have the appeal of being home to some of the world’s top universities, investment visas are not purely education-driven. Many affluent Chinese are simply looking for a bucolic bolthole which doubles as an investment, said Kingston Lai, chief executive of Asia Bankers Club.
“By their nature, visas for investment are usually a temporary way for a distressed government to raise funds quickly, which is why so many schemes launched in the wake of the financial crisis,” he explained. “But as economies grow stronger some programs are drying up. So when the opportunity comes, you need to act quickly.”
Lai said his members have recently been asking about Greece, after it announced a new three-generation citizenship visa for a US$250,000 property investment, the cheapest of all the offerings. Malta, Portugal, Cyprus and Spain are all promoting similar initiatives to wealthy Asians looking to diversify into a European pied à terre. The beleaguered Greek government is plugging the scheme in Asia, hoping to attract affluent Chinese on the hunt for a real estate bargain. With Greek real estate values as much as 40 percent below peak, it is could be great investment as much as a way to secure a European passport.
But there are some investment visa schemes which look set to stay for the long run. The industry has seen a considerable move towards the citizenship by investment programs of St Kitts and Nevis and the Commonwealth of Dominica, according to Micha Emmett, the managing director of legal advisor CS Global Partners.
“We’ve seen so many programs come and go but these two are the longest running citizenship by investment programs in the world, 30 and 20 years respectively,” she said. “These two have held their ground in being a sustainable and attractive option. Chinese investors are aware of this and have developed a strong affinity for these countries.”
She added that even though Europe remains a popular destination due to the Freedom of Movement act, which gives the right to live anywhere in the EU as an EU citizen, the investment thresholds are high for an immediate citizenship.
On the other hand, the risk of only receiving the residence has prompted more investors to seek beyond the European residence options. And despite the EU stamp, some countries within the EU still do not hold the status that the Western European counterparts or Commonwealth Caribbean options offer.
Clearly in future if governments want to attract the swelling wallets of the Chinese, they will have stiff competition.
Reproduced with permission from Wealth-X. For more information please visit www.wealthx.com